6 Reasons to Do an Annual Mortgage Checkup in 2023
Mortgage rates have been on the uptick in 2023, and home values are still rising, although not as quickly as they did in the past few years. This means that it’s more important than ever to make sure your mortgage is still working for you. Here are four reasons why you should do an annual mortgage checkup in 2023:
1. You may be able to refinance to a lower rate. Even though mortgage rates are higher than they were a few years ago, they are still lower than they were in the early 2000s. If you have had your mortgage for a while, you may be able to refinance to a lower rate and save money on your monthly payments.
According to a study by Bankrate, homeowners who refinance their mortgages can save an average of $1,800 per year.
2. Identify potential problems early on. If there are any problems with your mortgage, such as late payments or errors on your statements, it is important to identify them early on. An annual checkup can help you catch these problems before they become more serious. To identify potential problems with your mortgage early on, consider implementing the following strategies:
- Set Up Electronic Alerts: Many lenders offer electronic alerts that notify you of important events, such as upcoming due dates, changes to your mortgage statement, or potential discrepancies.
- Review Statements Regularly: Dedicate time each month to review your mortgage statements carefully, checking for errors, unauthorized activity, and any changes in your mortgage terms or interest rates.
- Monitor Your Credit Report: Regularly review your credit report to identify any unauthorized inquiries or accounts opened in your name, which could be signs of mortgage fraud.
- Communicate with Your Lender Proactively: If you anticipate any changes in your financial circumstances, contact your lender promptly to discuss options and seek guidance.
- Seek Professional Financial Advice: If you face difficulties managing your mortgage payments or navigating complex financial situations, consider consulting a financial advisor for personalized advice and support.
3. You may be able to shorten your loan term. If you can afford to make higher monthly payments, you may want to consider shortening your loan term. This will save you money on interest in the long run. For example, if you have a 30-year mortgage and you refinance to a 15-year mortgage, you will save about $30,000 in interest over the life of the loan.
Source: Freddie Mac
4. You may be able to get rid of mortgage insurance. If your down payment was less than 20%, you may be required to pay mortgage insurance. If your home value has increased since you bought it, you may be able to get rid of mortgage insurance. This will save you money each month.
5. Identify potential savings opportunities. There are always new mortgage products being developed. If you haven’t checked your mortgage in a while, you may be missing out on a better deal. For example, there are now mortgages that offer lower interest rates if you agree to make biweekly payments.
If you’re thinking about doing an annual mortgage checkup, here are a few things to keep in mind:
- Get quotes from multiple lenders. This will help you compare rates and fees.
- Make sure you understand the terms of the loan. Read the fine print before you sign anything.
- Ask about any hidden fees. Some lenders may charge fees for things like appraisals or title insurance.
- Consider a rate buydown product: on a new loan, a buydown lowers your monthly payments during the first one to three years of your mortgage. It’s kind of like paying points, only you don’t pay the upfront fee. The lender or seller pays the fee for you.
6. You will want to take this opportunity to review your Homeowners Insurance. Your homeowners insurance policy is an important part of protecting your investment in your home. An annual checkup can help you make sure that your insurance coverage is adequate and that you are not overpaying for unnecessary coverage.
Key Aspects to Review
Replacement Cost vs. Actual Cash Value: Replacement cost coverage pays to replace your home or belongings with new items, while actual cash value coverage pays the depreciated value of your items. If the value of your home or belongings has increased since you purchased your insurance, you may need to adjust your coverage to ensure that you have enough protection.
- Coverage Limits: Your policy will have specific limits for different types of losses, such as the total coverage for your home’s structure, personal belongings, and additional living expenses. Review these limits to ensure they are adequate to cover potential losses.
- Deductibles: Your deductible is the amount you pay out of pocket before your insurance coverage kicks in. A higher deductible will lower your premiums, but you’ll have to pay more yourself in case of a loss. Consider your financial situation and risk tolerance when choosing a deductible.
- Endorsements and Riders: Endorsements and riders are additional coverages that can be added to your policy to provide protection for specific risks, such as flood or earthquake damage. Review your policy to see if you have any endorsements or riders and consider adding additional ones if necessary.
- Liability Coverage: Liability coverage protects you from financial claims if someone is injured or their property is damaged on your property. Review your liability coverage limits to ensure they are adequate.
- Additional Living Expenses: Additional living expenses coverage pays for the cost of living elsewhere if your home is damaged and you are unable to live there temporarily. Review your limits to ensure they are sufficient to cover your expenses.
- Discounts: Many insurance companies offer discounts for certain factors, such as installing burglar alarms, having multiple policies with the same company, or maintaining a claims-free history. Review your policy to see if you qualify for any discounts.
- Exclusions: Every insurance policy has exclusions, which are specific events or losses that are not covered. Carefully review the exclusions in your policy to understand what is not covered.
Here are some additional tips for homeowners who are considering doing an annual mortgage checkup in 2023:
- Consider your financial situation. Have your income and expenses changed since you took out your mortgage? If so, you may want to adjust your loan terms to better fit your current financial situation.
- Think about your long-term goals. Do you plan to stay in your home for the long term? If so, you may want to consider a 15-year mortgage instead of a 30-year mortgage. This will save you money on interest in the long run.
- Talk to your lender. Your lender can help you assess your options and find the best mortgage for your needs.
Always Ensure Your Mortgage Aligns with Your Needs
An annual mortgage checkup is a great way to ensure that you’re getting the most out of your mortgage. By taking the time to review your loan terms and compare rates, you can save money and secure a mortgage that meets your needs.
So don’t wait, contact and Embrace Home Loans® specialist and schedule your checkup today.